Marriott International CEO Arne Sorenson said Monday that there is “tremendous opportunity” in its planned merger with Starwood Hotels & Resorts, indicated by Marriott’s higher offer to acquire the company.
A lot of that opportunity comes from creating a single loyalty program, Sorenson said during a call with investors and analysts discussing Marriott's $13.6 billion amended buyout offer, which Starwood accepted.
Initially, Marriott expects to run parallel loyalty programs. In the longer term, Sorenson said, a combined platform will benefit from Starwood's affluent consumers in the lifestyle and luxury segments and Marriott’s relationships with business travelers.
By investing in only one platform, Sorenson said, Marriott expects to improve the program's infrastructure and improve the tools to personalize relationships with customers.
Having one loyalty program will open up more partnership opportunities, including with cobranded credit cards, he said.
Together, Marriott and Starwood will create the largest hotel company in the world with 30 brands and about 5,700 hotels and 1.1 million rooms.
“Big is obviously good, but better is better — and really what we’re focused on is not just the size, but we’re focused on the breadth of choice that we offer to our customers and the power of some of the platforms we can build,” Sorenson said.
Sorenson discussed some Starwood brands on the call. He expects accelerated growth for the luxury St. Regis brand, and said that W Hotels, a luxury boutique brand, fills a space where Marriott currently does not have any brands. W has momentum that Sorenson believes will continue.
Element also fills a white space for Marriott. The lifestyle extended-stay brand “could be an interesting alternative to some of the housing rental services,” like Airbnb, he said.
AC by Marriott and Aloft compete in the upscale space and both have momentum, he said. Sorenson believes they have “different personalities” — AC has a more European feel, while Aloft has a more Western approach, he said. He predicted customers, owners and franchisees will continue to be drawn to each brand.
With regard to Sheraton, Starwood's largest brand, Sorenson said his company is “encouraged by the 10-point plan that Starwood put together last year." Announced last summer, the "Sheraton 2020" initiative includes plans for new brand positioning, a $100 million marketing campaign and other measures, like opening 150 more Sheraton hotels by 2020.
He did say some Sheraton hotels will have to be deflagged and that “those are important conversations to have with owners and franchisees,” but Marriott is optimistic about the brand.
Marriott also discussed potential synergies from the merger. Marriott said the Marriott-Starwood combination will result in annual savings of $250 million, up from the $200 million predicted in November. Sorenson said the company believes that could be fully achieved by 2018 or earlier.
Marriott CFO Leeny Oberg said the company identified another $50 million in savings after examining how Marriott and Starwood are structured over the past four months, going “continent by continent, discipline by discipline.”
Marriott has cleared antitrust review in the U.S. and Canada, Oberg said, with reviews in the European Union and China pending. She said the company expects a mid-2016 closing.